Powell: Federal Reserve Steadfast as Inflation and War Loom

Federal Reserve Chair Jerome Powell reassured markets, suggesting the Fed can wait to evaluate the economic impact of the Iran conflict before adjusting interest rates. Despite rising U.S. gasoline prices and inflation risks, Powell emphasized the need for balance between employment and price stability, maintaining current policy for now.

Federal Reserve Chair Jerome Powell on Monday expressed confidence that current Fed policy provides the flexibility needed to evaluate the potential economic impact of the Iran conflict before considering interest rate changes. Speaking during a Harvard University class, Powell noted that previous inflation-related rate hike expectations seem to have diminished.

With U.S. gasoline prices averaging around $4 per gallon, Powell acknowledged the pressure between achieving full employment and maintaining price stability. While there are upside risks to inflation, Powell emphasized the Fed is carefully monitoring, without immediate need for rate adjustments, as inflation expectations remain anchored long-term.

The meeting left the Fed's interest rate at a steady range of 3.50%-3.75%. Powell highlighted sustained inflation above the 2% target due to pandemic-related demand-supply constraints and recent tariff impacts. As oil prices remain volatile amidst the ongoing conflict, the Fed remains vigilant in its economic assessments.